A lot of organisations are seriously starting to look beyond the enterprise resource planning (ERP) market for their human resources (HR) solutions. Organisational size is no longer an indicator of the appropriate choice of product. Organisations looking to replace current HR systems, or further enhance their HR activities, can often not justify the expense and maintenance of an ERP HR system, and rather opt for a second or third tier product that costs a fraction of the ERP cousin.
The relatively small South African HR market is one of the reasons that HR point solutions have moved away from their core expertise.
Rob Scott, manager, Deloitte Consulting
Having dealt with some organisations recently that would traditionally fall into the ERP market, it has been interesting to witness a new direction of HR product selection taking place - with success!
ERP HR products have long been marketed as the Rolls-Royce of HR systems, while the non-ERP products were scorned upon as second-rate citizens, only suitable for the less-than-serious HR customer. There are many non-ERP systems available locally and globally that really are not worth the trouble, but if one investigates the market carefully there are a number of systems that have emerged with some really impressive functionality and technical architecture.
Simply the best?
So, are the ERP systems really the cream of the crop? The answer is yes, but the question is whether you want a Rolls-Royce - a car that takes a long time to build, is not built for speed, does not have a fancy dash board or a sporty steering wheel, and will never corner like a real sports car.
On the other side of the coin, the Rolls-Royce is highly stable, unlikely to break down and has a highly skilled support team that can rectify any problem. The car is highly detailed and specified - every part is understood.
Non-ERP HR systems stemmed mainly from two growth points: Either they started life as a payroll solution or as a highly focused HR point solution. In order to become competitive in the HR solutions market, they migrated to include either payroll or HR functionality but actually ended up as "lipstick-on-the-pig" software solutions - in other words, they looked good from the outside, but were technically unstable and difficult to operate and manage. There are, however, a few products built from scratch that are now reaping the benefits.
The relatively small South African HR market is one of the reasons that HR point solutions have moved away from their core expertise. In Europe and the US, there is plenty of market space for specialised HR solutions that can "bolt-on" to the ERP products - they are complementary rather than competitive to the larger HR solution clients. Instead of redesigning your existing ERP HR system, which often offers generic solutions, organisations can buy a relatively inexpensive point solution that offers far better functionality than the ERP solution, with the benefit of integration built into the product.
Weighing the options
So what are the pros and cons of selecting a non-ERP product for an organisation that requires the reliability and technical soundness of an ERP solution?
The most obvious advantage of a non-ERP solution is the cost of the software and the implementation cost. This spend tends to be much lower and implementation time is often far shorter. You may find that your customisations are accommodated easily and your upgrade rules are less rigid and less demanding than in the ERP market. These solutions may also offer a greater depth of functionality than the ERP system in certain areas.
There are a lot of pitfalls to be aware of - concerns that have led larger organisations to opt for the ERP product. One of the critical pitfalls to be aware of is true system integration. You might discover your employee and management empowerment efforts curtailed because the underlying product development does not align to relational database fundamentals. You may even find yourself training your staff in multiple systems to accommodate the lack of integration. A common example of this exists between the payroll engine competencies set versus that of the HR modules.
Another area to be watchful of is the reporting capabilities provided for. Even if a good third-party reporting tool is provided, it may not give you the wonderfully demonstrated reports if your system design is poor.
Research and development will always be lacking in non-ERP products, so the products tend to be followers rather than leaders in terms of system design. Inherent in this point is that often the owner of the product is the source of all knowledge, or it resides in one or two key employees. Your risk exposure is considerably higher in the non-ERP market.
Testing, testing
Technical design and capability are probably the biggest issue to be aware of. Although the non-ERP product vendor will give you favourable statistics with respect to performance on various platforms, operating systems and data bases, the reality is that they tend to be simulated testing and are not based on practical testing. The products are often not tested properly across WANs, LANs or VANs, or the volumes of data produced by bigger organisations.
Lastly, buyers should be wary of "novel" items. They may be very attractive, but prove to be a nightmare that becomes an expensive burden. Memory-based payrolls, for example, may be very quick and look impressive, but you may find your memory requirements are your biggest expense of the project.
Larger organisations that are considering non-ERP products will have more risk to manage, but if you are prepared to deal with the potential problems, then non-ERP HR solutions are a viable option. However, first make sure you have some expert advice on the selection process and the selected product.
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